Japan's wealth management "historic change": entering the era of inflation, will the Japanese shift from savings to investment?

The Japanese wealth management market is undergoing a fundamental transformation driven by inflationary pressures and demographic changes.

According to news from the Chasing Wind Trading Desk, Morgan Stanley analysts stated in a report on May 18 that persistent inflation in Japan has turned the real returns on cash deposits negative, forcing household financial assets to shift from conservative allocations to equity investments, with the proportions of stocks and investment trusts rising to 13.4% and 6.1%, respectively. Analysts predict that by 2035, the scale of financial assets for high-net-worth and affluent individuals will reach 1,089 trillion yen (USD 6.9 trillion), with a compound annual growth rate of 4.6%-8.3%, which may drive the central tendency of equity assets upward.

Cash Devaluation Pressure Forces Investment Demand

Morgan Stanley analysts stated that the long-maintained "high savings, low risk" allocation model of Japanese households is difficult to sustain in the face of persistent inflation.

As of the end of 2024, although cash deposits still account for 50.9% of household financial assets, this has significantly decreased from 56% in 2015, while the proportions of stocks and investment trusts have risen from 8.2% and 3.6% in 2010 to 13.4% and 6.1%, respectively. The core driving factor comes from inflation eroding real purchasing power — the CPI year-on-year increase in 2024 is expected to reach 2.8%, while the average interest rate on bank deposits is only 0.03%-0.1%, the implicit cost of holding cash has for the first time become visible at an observable speed.

On the policy level, the new NISA account has become a catalyst for transformation. This tax-exempt tool with an annual investment limit of 900,000 yen is expected to have 25.6 million accounts opened by 2024, with annual new investments reaching 17.4 trillion yen, of which 59% flows into stocks and 47% is allocated to ETFs. Data shows that investors aged 20-40 account for 58% of NISA users, with their equity asset allocation ratio reaching 38%, which is 2.3 times that of the group aged 50 and above, reflecting that the younger generation's recognition of "investing to combat inflation" is significantly higher than that of previous generations.

Aging Population Drives Intergenerational Asset Transfer

Japan's aging rate has reached 28.7% (2024), and the scale of wealth transfer between generations continues to expand.

Morgan Stanley estimates that over the next decade, the younger generation will inherit more than 300 trillion yen in assets, driving the migration of household financial assets from "savings-type" to "investment-type." This trend is particularly evident among high-net-worth and affluent individuals: among clients with assets exceeding 50 million yen, 27% of financial assets are flowing into stocks and alternative investments, an increase of 9 percentage points compared to 2020, while the demand for estate planning and cross-border investments accounts for over 60% The mass market at the base of the wealth pyramid is also undergoing structural changes. The mass affluent class with assets below 50 million yen accounts for 57%, becoming the core engine of growth. Online brokers are capturing the market through low commission strategies, with online brokerage transactions expected to account for 80% in 2024. After platforms like SBI Securities eliminated domestic stock commissions, the number of clients surged by 45% within a year; digital bank Rakuten Bank attracted 24 trillion yen in funds with a 1.6% deposit rate, and mobile trading accounted for 67%, showing 35% higher user stickiness compared to traditional banks.

Digital Capability Determines Survival Space

The historic turning point in Japan's wealth management is essentially the end of the deflationary mindset. For investors, the core challenge has shifted from "whether to invest" to "how to build adaptive strategies amid transformation."

The valuation logic of financial institutions is shifting from traditional banking to wealth management capabilities—leading banks with strong digital capabilities (such as Mitsubishi UFJ and Mizuho) are expected to stand out in the transformation, while institutions relying on offline channels may face customer attrition pressure.

Traditional financial institutions are facing the challenge of "digital Darwinism." 80% of brokerage transactions are completed through online channels, while some regional banks have online transaction ratios of less than 35%, with customer attrition rates 18% higher than digital banks.

The transformation path of leading institutions focuses on technological penetration and ecological integration. 70% of financial institutions have deployed general AI, and Sumitomo Mitsui plans to invest 50 billion yen in generative AI development by 2028 for customer demand forecasting and portfolio optimization; robo-advisors manage assets of 20.5 trillion yen, with fee rates only 1/3 to 1/2 of traditional services.

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